The UK economy could take five years to rebound to pre-pandemic levels due to worse-than-expected coronaphobia, leading economists warned today.
Experts at large consultancy firm EY said they expected gross domestic product (GDP) to remain below what it was in 2019 through 2024, dealing a blow to hopes of a fast recovery.
They blamed higher levels of “consumer caution” after Boris Johnson allowed retailers to reopen with strict anti-virus restrictions in place.
Although he believes the recession is already over, the depth of the economic crisis in the spring means that the UK will take some time to fully recover.
He warned that the unemployed in the UK could more than double to more than 3 million when the holiday program ends in the fall, with the unemployment rate rising from 5.1% to 9%.
Experts at the consulting firm estimate that GDP will contract 11.5% this year in the UK, much worse than the 8% they predicted just a month ago. It will then rebound to record growth of 6.5% in 2021.
Consumer spending will drop consumer spending to 11.6% during 2020, before rising 6.6% in 2021, as the labor market begins to recover.
Howard Archer, chief economic adviser for the EY Item Club, said: “Even as foreclosure restrictions ease, consumer caution has been much more pronounced than expected.
“We believe consumer confidence is one of the three key factors that are likely to weigh on the UK economy for the rest of the year, alongside the impact of rising unemployment and low levels of investment companies. “
“The UK economy may have passed its low point, but it looks increasingly likely that the recovery will be much longer than expected.
“May’s growth was lower than the lower forecast.
“In the middle of this year, the economy was a fifth smaller than it was at the start.
“Such a drop creates more room for rapid growth later on, but it will be from a much lower base.
With the numbers high, the economic contraction will have a serious impact on households across the country, with employment set to double according to EY.
He predicts a 3.9 percent jump to 9 percent of the unemployed population at the end of this year and the start of next.
It is a fear shared by many members of the government.
The Treasury has pledged to pay £ 1,000 per employee for companies bringing back staff on leave to work.
Mr. Archer said: “The performance of the labor market is essential for the prospects of the economy in the short and long term.
“Job losses and weak real wage growth are expected to dampen consumer spending, although the Chancellor’s instinct to focus on jobs in his summer statement should provide some support.
“The Chancellor may be looking to provide additional labor market support in this fall’s budget. “